The past week has been a period of extreme volatility around the world due to the “Liberation Day” tariff announcement made by US President Donald Trump.

Many economies and businesses can no longer rely upon stability. Trade protocols have been ripped up and revenue projections now have to be reworked.

In the last few days, US$5 trillion has been wiped from the US stock market, with Trump declaring he would not relent. He proclaimed for too long, other countries particularly China had been ‘ripping off’ the United States and that it had to stop.

His tariff decision elicited fear across the world and made many readily acknowledge that the United States is the pre-eminent economic power in this world and to be shut out by it could be extremely deleterious.

Trump has said at least 75 countries have come “to kiss his ass” begging to do deals which would see a reduction in the tariff they have to comply with.

But with world markets roiling under his decision, and the bond market tanking, perhaps Trump and his Cabinet realised this stance could lead to a deep recession both in the United States and across the world. In other words, this move was counter-productive.

Then again it could be a brilliant move that brought countries to the negotiating table and was a page out of Trump’s book ‘The Art of the Deal‘. Donald Trump prides himself on his negotiating skills.

Trump seems intent on breaking China’s economic power and is looking to punish those who trade with it. Perhaps this is what this tariff war is all about.

Yesterday, President Trump said somebody had to stand up and put this tariff regime in place and that no other president had the guts or wherewithal to do it.

“China was making US$1 trillion from us. They exploit our market and we have to pay heavily to enter theirs. It is not fair. Charles Schwabb said to he has been waiting 40 years for what I did. No one would have done what I have done. You’ve got to do what you have to do. I just want a fair deal. We have a US$35 trillion debt for a reason,” he said in the White House Garden.

He has insisted that countries should not retaliate by raising tariffs imposed on the United States and that those who do would pay a price.

The US initially imposed a 34 per cent tariff on China on top of the 20 per cent imposed earlier this year. China hit back with a 34 per cent tariff on the US which angered  President Trump who then raised the tariff on China by an additional 50 per cent.

President Trump insisted that China must back down and that if it didn’t he would continue to raise the tariff imposed on it. China didn’t back down, instead raising their levy on United States imports to 84 per cent.

Yesterday, Trump again retaliated taking the decision to place a 125 per cent tariff on China but keeping it at just 10 per cent on all other countries for the next 90 days.

How long with this trade war with China go on and what will it cost the rest of the world? Last year the US ran a US$300 billion trade deficit with China. 

President Trump is aware of the turbulence his tariff policy is causing and its inflationary and recessionary impact would have been brought to his attention. It was a right decision to take time and reconsider and allow others to negotiate terms.

Business leaders who he admires such as Jamie Dimon, Bill Ackman, Richard Branson, Elon Musk and Ken Longone have expressed reservations about Trump’s tariff position. They must have sowed seeds of doubt in his mind causing him to rethink this matter.

China is the United States’ number three trading partner and has become the world’s leading manufacturer. President Trump wants businesses to produce goods in the the United States and favours its citizens buying goods from its own country. Why buy Toyota, BYD, BMW when you should be buying Chrysler, Ford, Tesla, Cadillac, Chevrolet?

US Treasury Secretary Scott Bessent said: “We are the deficit country. So what do we lose by the Chinese raising tariffs on us? We export one-fifth to them of what they export to us. So that is a losing hand for them.

“China has shown it is a bad actor. We said don’t raise your tariff in retaliation. They did and now they will pay the price. The U.S. is the world’s greatest country and economy and President Trump is showing the world just that.

“Many countries have asked us to negotiate new tariff terms and we will be engaging in bespoke deals of which President Trump will be engaged in all tariff negotiations.”

Turning his ire on China, President Trump wrote on Truth Social: “ Based on the lack of respect that China has shown to the world’s markets, I am hereby raising the tariffs charged to China by the United States to 125 per cenrt effective immediately. At some point hopefully, in the near future, China will realise that the days of ripping off the USA and other countries is no longer sustainable or acceptable.

“Conversely and based on the fact that more than 75 countries have called representatives of the United States, including the Department of Commerce, Treasury and the USTR, to negotiate a solution to the subjects being discussed relative to trade, trade barriers, tariffs, currency manipulation and non-monetary tariffs and that these countries have not at my strong suggestion, retaliated in any way shape or form against the United States.

“I have authorised a 90-day pause and a substantially lowered reciprocal tariff during this period of 10 per cent, also effectively immediately. Thank you for your attention to this matter.”

What has to be factored in is that 70 per cent of the goods sourced by Walmart and Amazon come from China. Trump went on to say later that he expects China will come to the table looking to renegotiate tariff terms but the Chinese are a proud people in particular President Xi Jinping and have not as yet worked out how to humble themselves before mighty America.

China is steadfastly holding its ground with foreign ministry spokesperson Lin Jian saying, “China opposes and will never accept such hegemonic and bullying practices.”

One gets the impression China is betting on itself and believes it can hold its own against America.

President Trump’s abrupt climbdown saw US stock markets immediately surge with the Dow rising to its biggest rally in five years on Trump’s backdown. The S&P 500 index climbed 9.5 per cent in the biggest one-day rally since 2008. Tesla, Nike Apple stocks made significant gains.

So how is the tariff policy working out for the United States?

“We’re making a fortune with tariffs-US$2 billion a day,” said President Trump.

This figure is yet to be substantiated but the US did import US$9 billion worth of goods a day in 2024.